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Aifa: RDR questions still to be answered

Chris Hannant MM blog

As the deadline for the implementation of RDR comes ever closer, a number of issues have come to our attention as advisers finalise their plans for 1 January 2013 and beyond. Some of the more common themes emerging are providers’ readiness, decency levels, terms of business and the operation of the restricted and independent classification.

First, there is a need for greater clarity around product providers’ propositions. While we have seen some providers come out with statements about their plans for the post-RDR world, there are still many that have yet to provide any information to advisers. It is essential that providers communicate their plans for their product ranges and what charging structures they will support as soon as possible and thereby enable advisers to plan effectively for after 1 January 2013.

The subject of decency levels has led to concern among advisers. While Aifa accepts there are circumstances where they may be appropriate, there should be agreement about how they will operate in practice.

It has been suggested by some providers that they would contact clients direct. It seems clear to me that the product provider’s default position must be to contact the adviser, not their client. But advisers should be checking they understand, and are happy with, individual product providers’ plans in this respect.

Similarly, terms of business is another area that advisers will need to give attention to. We would expect that providers will need to reissue TOBAs to take account of the changes brought about by RDR. However, there is some evidence that providers are taking this opportunity to make other changes, not necessarily to the adviser’s advantage. Aifa will continue to monitor the situation but advisers will be well advised to pay close attention to what they are being asked to agree to.

One question that has led to some interesting debate among our members is whether it is possible to operate both a restricted and independent model within one firm. While there is consensus that this should be possible within the larger firms, the challenges of such an approach will be much greater for smaller firms. The FSA’s guidance on independent and restricted advice published in June addresses the disclosures that must be made if operating a dual offering model.  A firm must be clear to clients the type of advice provided. A firm offering both types of advice cannot have the word independent in its name. 

It is clear that there is still work to be done – by the FSA to clarify how the rules will work in practice, by the product providers to ensure they have made the necessary changes to their systems and by advisers to make sure they have all the pieces of the jigsaw in place by 31 December. Aifa will continue to facilitate dialogue between the FSA and its members. Our website is regularly updated with the latest news and our technical helpline on 020 7628 1827 is available for members who have queries about how best to get their business ready for the change.

Chris Hannant is policy director at Aifa

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Becoming a headcase IFA 12th October 2012 at 8:54 am

    I, also, do not believe providers should be contacting clients directly. Clients are getting enough information from providers about fund changes etc and the changes the RDR will bring should be left to the IFA to communicate (when things are clearer). I have already spoken to many of my clients, to give them a general outline, and do not need further interference from providers(some with dubious motives), thank you very much.

    As for things becoming crystal clear I have a feeling that will not happen until well after the actual implemetation date. The whole thing is a massive shambles and I suspect many IFAs are like me, totally bewildered and unprepared. I am reluctant to spend hour after hour reading about the changes I need to put in place when the sands are shifting all the time. I have a living to make and my exam papers have still not been marked (another shambles) after months of waiting. I have a feeling I will not be doing any business until well into 2013.

  2. The biggest RDR question is why AIFA rolled over and let this happen in the first place

  3. Nice article – four years too late. Thanks AIFA. We’ve all been battling away like King Canute in your absence.

  4. Hello Playmates!

    The brown stuff is going to hit the air conditioning come January 1st. There is confusion on almost every front with RDR. The only people who are not confused is the FSA but as they’ve never understood anything about what they regulate, they’re just plain ignorant.

    Everyone who didn’t stand up to put a stop to RDR will have egg on their faces.

    It’s now becoming so ridiculous that it’s like watching a train crash in slow motion.

    Let the good times roll…!

    Love and kisses

    Larrykins xxx

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